In a strongly-worded e-mail to Tata Sons directors and Tata Trusts, Mistry listed various omissions and commissions by group firms — including Ratan Tata’s — that he inherited four years ago.

Cyrus Mistry who was removed as chairman of Tata Sons slammed the Tata group and its Chairman Ratan Tata on Wednesday, questioning the corporate governance practices and operations of various group companies, investments, fraudulent transactions and a possible write down of Rs 1,18,000 crore by Tata companies. In a strongly-worded e-mail to Tata Sons directors and Tata Trusts, Mistry listed various omissions and commissions by group firms — including Ratan Tata’s — that he inherited four years ago.

“Indian Hotels, beyond flawed international strategy, had acquired the Searock property at a highly inflated prices and housed in an off balance sheet structure. In the process of unravelling this legacy, Indian Hotels has had to write down nearly its entire networth over the past three years. This impairs its ability to pay dividends,” the e-mail said.

Tata Capital had a book that required significant clean up on account of bad loans to the infrastructure sector. “The loan to Siva was under the strong advice of Executive Trustee,” he has alleged in the e-mail.

Telecom

Of all the companies in the portfolio, the telecom business has been continuously haemorrhaging, he said. “If we were to exit this business via fire sale or shut down, the cost would be $4-5 billion. This is in addition to any payout to DoCoMo of at least a billion plus dollars. The original structure of DoCoMo transaction raises several questions about its appropriateness from a commercial or prudential perspective within the then legal framework,” Mistry said.

Power

On the power business, he said Tata Power aggressively bid for the Mundra project based on low-priced Indonesian coal. “As regulations changed, the losses in 2013-14 alone amounted to Rs 1,500 crore. Given that Mundra constitutes Rs 18,000 crore of capital employed (40 per cent of the overall capital employed in the group), this substantially depresses the return on capital for Tata Power as well as carries the risk of considerable future impairment,” Mistry said.

Automobiles

Mistry said an even more challenging situation arose in Tata Motors, both on the commercial and passenger vehicles. “Before 2013, in order to shore up sales and market share, Tata Motors Finance extended credit with lax risk assessment. As a result, the NPAs mounted to being in excess of Rs 4,000 crore,” he said. Lambasting Ratan Tata’s pet car project ‘Nano’, Mistry said Nano product development concept called for a car below Rs one lakh, but the costs were always above this. “This product has consistently lost money, peaking at Rs 1,000 crore. As there is no line of sight to profitability for the Nano, any turnaround strategy for the company requires to shut it down. Emotional reasons alone have kept us away from this crucial decision.” Attacking Ratan Tata directly, Mistry said, “another challenge in shutting down Nano is that it would stop the supply of Nano gliders to an entity that makes electric cars and in which Mr Tata has a stake.”

Airlines

Opposing Tata’s investment in airline business, Mistry said, “Early in my tenure, our foray into the aviation sector began when Mr Tata ushered into his office and handed me a report on Air Asia and wanted a proposal tabled at the Tat Sons board meeting. My pushback was hard but futile. A few months later I was surprised to be confronted with a similar situation requiring me to execute a fait accompli JV with Singapore Airlines. The passion for the airline sector has led Mr Tata to continue his involvement with the strategy of the two airlines.”

He said board members and trustees are also aware that in the case of Air Asia, ethical concerns have been raised with respect to certain transactions as well as the overall prevailing culture within the organisation. “A recent forensic investigation revealed fraudulent transactions of Rs 22 crore involving non-existent parties in India and Singapore. Executive Trustee Mr Venkataraman who is on the board of Air Assia and also shareholder in the company considered these transactions as non-material and did not encourage further study. It was only at the insistence of independent dirctors, one of who immediately submitted his resignation, that the board decided belatedly to file a first information report,” he said.

Tata Sons and Air Asia did not respond to Mistry’s comments.

Mistry’s defence of his tenure

Defending his tenure, Mistry said, “Despite all of the above, during my term, the operating cash flows of the group have grown at 31 per cent compounded per annum”. “The Tata group valuation from 2013 to 2016 increased by 14.9 per cent per annum in rupee terms as against the Sensex annual increase of 10.4 per cent. Tata Sons’ networth has increased from Rs 26,000 crore to Rs 42,000 crore after considering the impairments,” he said. “I hope you do realise the predicament that I found myself in,” he said in the e-mail.